Ringgit opens higher vs US dollar amid rate-hike expectations

 The local note strengthens to 4.0560/4.0635 as higher US Treasury yields suggest the Federal Reserve could raise its benchmark rate.

KUALA LUMPUR:

The ringgit opened higher against the US dollar on Wednesday as the greenback weakened, while markets weighed the prospects of interest rate hikes in the US and Japan.

At 8am, the local currency strengthened to 4.0560/4.0635 against the greenback from Tuesday’s close of 4.0605/4.0640.

Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid said higher US Treasury yields suggested that the Federal Reserve could opt for a higher benchmark interest rate when the Federal Open Market Committee (FOMC) meets on Sept 15-16.

“The US Treasury notes auction for three-month and six-month bills yielded higher at 3.80% and 3.89%, respectively,” he noted.

Afzanizam also said the Japanese yen strengthened against the US dollar to 153.53 yen, reflecting growing expectations that the Bank of Japan (BOJ) could raise its policy rate, supported by signs of stronger economic performance.

He said the BOJ could raise its policy rate by 25 basis points on Sept 18 as the economy showed healthy growth alongside rising inflation, which stood at 1.9% in July.

“Japan’s second quarter of 2026 gross domestic product came in higher than expected at a 1.4% quarter-on-quarter annualised rate, versus consensus estimates of 1.1%.

“In addition, wage growth among Japanese employees accelerated further to 4.7% year-on-year in July, against market expectations of 3.9%,” he said.

Meanwhile, Quintex Intel global strategist Stephen Innes said currency markets were treating an expected Fed rate move largely as an insurance hike rather than the start of a sustained tightening cycle.

“Investors’ view is that this could be reversed fairly quickly once West Asia tensions ease and oil settles back towards the mid-US$80s per barrel, which may increasingly be viewed as the new normal,” he added.

The ringgit traded lower against most major currencies.

It slipped against the Japanese yen to 2.6437/2.6488 from 2.6374/2.6398 at Tuesday’s close, fell against the euro to 4.7167/4.7254 from 4.7151/4.7191, and eased against the British pound to 5.4934/5.5036 from 5.4926/5.4974.

Against regional currencies, the ringgit traded mostly higher.

It edged up against the Thai baht to 12.3241/12.3529 from 12.3285/12.3447 at the previous close, strengthened against the Philippine peso to 6.47/6.49 from 6.48/6.49, and rose against the Indonesian rupiah to 230.0/230.5 from 230.3/230.5 previously.

However, the local note softened against the Singapore dollar to 3.2081/3.2143 from 3.2073/3.2104 previously. - FMT